Mandatory Additional Security Prescribed for “Fly by Night” dealers under Delhi VAT

In what could be a move to safeguard the Delhi Value added tax revenue from ‘Fly by night’ dealers the Delhi sales tax authorities have issued a circular which may increase the burden on the ‘Genuine and Fair’ dealers of the state.
In Circular No. 20 of 2015-16 dated 19th August, 2015, the government has prescribed additional security for specified (termed as “fly by night” dealers by circular) an amount equal to 0.1% of the maximum of the quantified turnover in any of the last three financial years in the manner prescribed in rule 23 of the DVAT Rules, 2005.


Who are the Specified Dealers & what is Quantified Turnover?
A dealer registered with the department within last three years (If one has registered recently, this has direct implication), whose turnover excluding the turnover of goods specified in the First Schedule and the turnover of exports (hereinafter mentioned as `Quantified Turnover’) has crossed Rs. 10 crores in any of the financial year’s from the year of his registration with the department and who has deposited tax less than 0.1 % of such quantified turnover in the respective financial year(s).
Why is such circular Issued?
The department has been able to detect numerous dealers, during recent years, who in terms of provisions of Section 40A of the DVAT Act, 2004 have entered into an arrangement to defeat the purposes of the DVAT Act or any provision of the Act, by way of claiming refunds on Input Tax Credit to which they are not entitled or by providing fictitious ITC to the purchasing dealer or by downloading Central Forms against fictitious inter-state purchases. Such dealers are not only causing huge amount of revenue loss to the Government but also cause a great amount of inconvenience to genuine dealers.
It has been noticed that majority of such dealers have been recently registered and are `fly by night’ operators, who usually vanish from the system within a short span of time. This issue was also discussed with various trade associations and it was felt that there is a need to check activities of such dealers.
It is hereby informed to all concerned that with an aim to safeguard revenue of the government from such arrangements and frauds, the department is contemplating requiring additional security from following class of dealers
Author’s Note
The Intent of the government is to ensure that the dealers who have just been registered to hurt the revenue by wrong means shall be duly addressed by the security mechanism.
Additionally, it will impact all those genuine dealer(s)’s who purchase on local input tax and then engage in Sales (other than export / First Schedule Sales) on which tax is payable at rate lower than that at which purchased.
Any Circular / notification of this sought is bound to have two side of Coin effect!

Stay updated! Join our Email Newsletter for exclusive Articles, updates, and announcements.

Join our Email Newsletter

Stay updated! Join our Email Newsletter for exclusive Articles, updates, and announcements.

Join our Email Newsletter
Subscribe
Notify of
guest

0 Comments
Inline Feedbacks
View all comments